The International Monetary Fund (IMF) has declared a cut in Asia’s economy, due to the sharp slumps in countries like India, the Philippines, Malaysia, and many others. IMS has previously declared Asia’s economy to contract 2.2% this year, reflecting sharper-than-expected contractions as the second and third wave of the COVID-19 outbreak took a heavy toll on the region.
As IMF has upgraded the growth forecast for 2021, it has warned that the recovery will be sluggish, especially in the East Asian region, where many countries are dependent on tourism as the hospitality sector is seen taking a particularly hard hit for many months. IMF has released a report in which it has mentioned India’s economy to shrink by 10.3% due to weak global growth, closed borders, and increasing tensions around import, export, technology. Fear of Infection and social distancing in the society are dimming the buyer’s confidence, that is keeping economies’ movements below the capacity and it is expected to remain the same until people get vaccinated.
In the recovery phase, Asian economies are likely to grow, due to strong recoveries in larger economies and higher trade deals with the United States and European countries. But, the IMF has also pointed out the possibility of tighter financial conditions in the western world along with the chance of another wave of COVID-19, which is still a considerable risk for most of the countries. As of today, the pandemic seems far from over, hence strong policy support is needed, in some cases, it should increase to achieve the level at which the economy can sustain in the region.
Asian countries are still battling with the pandemic situation and is also looking for a full arsenal of policy support, that most of the business houses require after going through the bad phase for many months. The inclusive policy can include helping hand to household and financial aid to small businesses, to cope up with unexpected changes that have caused in the last few months. These unexpected structural changes include permanent job losses in many service-based industries such as travel and tourism. The government needs to group solid and broken businesses in the different group as many non-viable firms need an exit plan while solid businesses, which have somehow survived during a pandemic are expecting strong financial push by the policymakers.
For both, small and large economies in the region, there is a need to redouble efforts to keep the people connected to the workforce chains, which is the backbone of many service industries. The battle with COVID-19 is like to run well towards late 2021, as scaling up production and implementation of vaccination campaigns will also take another six to 12 months depending upon the size of the population in different countries. The two countries (India and Indonesia) having 47% of Asia’s population have not yet fixed the pandemic situation. The rising stress for small and medium enterprises (SMEs) and activity restrictions at the local level are expected to end. The long-term forecast is edging up with 6% annual growth for 2022-25 in major economies such as India. This is thanks to the arrival of good vaccines and pro-growth reform drives by policymakers in the region.